Sterling Advances While Yen Weakens Despite Bank of Japan Hawkish Signals

GBP/JPY climbed on Thursday, reversing the losses incurred the previous day. The gains stem primarily from weakness in the Japanese Yen rather than significant upside news for the British Pound, as the economic calendar offered limited fresh catalysts. At the time of writing, the cross pair was trading around 216.33, up 0.53% on the day.

Although the Bank of Japan is widely expected to raise interest rates next month, the Yen continues to face downward pressure. Rising oil prices, driven by the US-Iran tensions, pose a key near-term challenge, given Japan’s heavy reliance on Middle Eastern energy imports. Additional headwinds include concerns about government spending and Japan’s elevated public debt levels.

In contrast, UK inflation and labor market data released this week reinforce expectations that the Bank of England will maintain its current policy rate at 3.75%, which remains well above the Bank of Japan’s 1% policy rate. The substantial rate differential favors the higher-yielding British Pound and supports further upside potential in GBP/JPY.

Looking ahead, market participants will focus on Japan’s National Consumer Price Index (CPI), UK Retail Sales data, and the preliminary S&P Global Purchasing Managers’ Index (PMI) reports for August, all slated for release on Friday.

Technical analysis

Technical indicators show GBP/JPY has recovered approximately half of the declines following the recent US-Japan foreign exchange intervention. The pair bounced off the 200-day Simple Moving Average (SMA) and subsequently moved above both the 100-day and 50-day SMAs, reinforcing a positively biased near-term outlook.

The 14-day Relative Strength Index (RSI) hovers near 55, reflecting upward momentum without nearing overbought levels. The Moving Average Convergence Divergence (MACD) has turned positive, suggesting that bullish momentum is rebuilding, while the Average Directional Index (ADX) around 23 signals moderate trend strength.

On the upside, initial resistance is located at the horizontal level near 216.50, followed by a stronger barrier at 218.50. On the downside, the 50-day SMA at 215.59 provides initial support, ahead of the 100-day SMA at 214.81. A deeper correction could test the 200-day SMA at 212.51.

Japanese Yen Price Today

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Australian Dollar.

USDEURGBPJPYCADAUDNZDCHFUSD-0.06%-0.19%0.38%-0.29%0.23%-0.19%0.10%EUR0.06%-0.13%0.45%-0.21%0.29%-0.14%0.16%GBP0.19%0.13%0.56%-0.09%0.42%0.00%0.28%JPY-0.38%-0.45%-0.56%-0.65%-0.13%-0.57%-0.28%CAD0.29%0.21%0.09%0.65%0.53%0.10%0.38%AUD-0.23%-0.29%-0.42%0.13%-0.53%-0.42%-0.16%NZD0.19%0.14%-0.00%0.57%-0.10%0.42%0.31%CHF-0.10%-0.16%-0.28%0.28%-0.38%0.16%-0.31%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).

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